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Bungalow new-build in garden - CGT calculation

Trying to understand how the CGT would be calculated when we come to sell bungalow we are building

Didn't find your answer?

Hi all.

Hoping someone will be able to help me out here. 

The facts -  we received planning permission and have started construction of a bungalow at the bottom of our garden. The garden is attached to our current property which is our only other residence which we live in full time. The existing property and garden are less than 0.5 hectares. We intend to rent the bungalow when it is constructed and have no plans to sell it for at least 5-10 years. We are just in the process of splitting the existing title deeds (and getting the existing mortage lenders permission to do this), so that we can get a mortgage on the new bungalow after it is finished (we have borrowed from family during construction). Currently, we are planning on owning and renting the bungalow as individuals and not through a limited company. 

I think the main question I have is how profit for any CGT would be calculated if we sold in the future. We would obviously know the sales price achieved and original construction costs of the bungalow, but do we also need to include a cost for the bungalow land? We were going to ask a surveyor to value the bungalow land now, but should this be a value with or without the planning permission? I guess it is beneficial to value with planning permission as this would give a higher value and reduce the profit when we sell in the future?

Any advice would be very much appreciated, or if you can point me in the direction of the relevant HMRC guidance and I will try and research myself. 

Many thanks in advance.

Replies (11)

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By The Dullard
13th Feb 2020 14:56

Will you let me live in the bungalow for nothing please?

Thanks (3)
Replying to Rammstein1:
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By unkychris
13th Feb 2020 15:06

Thanks, but anything more specific? The link is to the homepage of HMRC.

Thanks (0)
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By Wanderer
13th Feb 2020 15:16

unkychris wrote:

Hi all.

Hoping someone will be able to help me out here. 

The facts -  we received planning permission and have started construction of a bungalow at the bottom of our garden. The garden is attached to our current property which is our only other residence which we live in full time. The existing property and garden are less than 0.5 hectares. We intend to rent the bungalow when it is constructed and have no plans to sell it for at least 5-10 years. We are just in the process of splitting the existing title deeds (and getting the existing mortage lenders permission to do this), so that we can get a mortgage on the new bungalow after it is finished (we have borrowed from family during construction). Currently, we are planning on owning and renting the bungalow as individuals and not through a limited company. 

I think the main question I have is how profit for any CGT would be calculated if we sold in the future. We would obviously know the sales price achieved and original construction costs of the bungalow, but do we also need to include a cost for the bungalow land? We were going to ask a surveyor to value the bungalow land now, but should this be a value with or without the planning permission? I guess it is beneficial to value with planning permission as this would give a higher value and reduce the profit when we sell in the future?

Any advice would be very much appreciated, or if you can point me in the direction of the relevant HMRC guidance and I will try and research myself. 

Many thanks in advance.

Quote:
The facts - we received planning permission and have started construction of a bungalow at the bottom of our garden.
Always best to seek advice before you start to carry out the transactions.
Thanks (2)
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By Accountant A
13th Feb 2020 15:13

unkychris wrote:

We were going to ask a surveyor to value the bungalow land now,

Just a warning. They will expect payment. It's only accountants who give professional advice for free.

Thanks (2)
Replying to Accountant A:
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By The Dullard
13th Feb 2020 15:15

Is there not a value my 'ouse for 'owt forum that one can use?

Thanks (1)
Replying to The Dullard:
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By Accountant A
13th Feb 2020 15:18

The Dullard wrote:

Is there not a value my 'ouse for 'owt forum that one can use?

He could ask the solicitor who is doing the title deed work for nothing if he knows of one.

Thanks (2)
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By Accountant A
13th Feb 2020 15:17

unkychris wrote:

Any advice would be very much appreciated

https://find.icaew.com/

Thanks (2)
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By unkychris
13th Feb 2020 15:31

Thanks all.

Thanks (1)
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By John R
13th Feb 2020 16:41

This is a forum for accountants and other financial professionals to discuss problems rather than for the general public to obtain free advice. Hence why you have not received much help. It's too late now, but had you sought professional advice, it may well have been suggested that you should transfer the land to a separate entity (e.g. a limited company) after planning permission was obtained but before undertaking any other development work as this could have resulted in you becoming entitled to private residence relief on the uplift in value of the land. I suggest you speak to an accountant urgently to avoid missing out on other tax saving ideas.

Thanks (0)
By Paul D Utherone
13th Feb 2020 18:03

The question for posterity:

unkychris wrote:

Hi all.

Hoping someone will be able to help me out here. 

The facts -  we received planning permission and have started construction of a bungalow at the bottom of our garden. The garden is attached to our current property which is our only other residence which we live in full time. The existing property and garden are less than 0.5 hectares. We intend to rent the bungalow when it is constructed and have no plans to sell it for at least 5-10 years. We are just in the process of splitting the existing title deeds (and getting the existing mortage lenders permission to do this), so that we can get a mortgage on the new bungalow after it is finished (we have borrowed from family during construction). Currently, we are planning on owning and renting the bungalow as individuals and not through a limited company. 

I think the main question I have is how profit for any CGT would be calculated if we sold in the future. We would obviously know the sales price achieved and original construction costs of the bungalow, but do we also need to include a cost for the bungalow land? We were going to ask a surveyor to value the bungalow land now, but should this be a value with or without the planning permission? I guess it is beneficial to value with planning permission as this would give a higher value and reduce the profit when we sell in the future?

Any advice would be very much appreciated, or if you can point me in the direction of the relevant HMRC guidance and I will try and research myself. 

Many thanks in advance.

Thanks (0)
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